Single-Member LLC Taxes, Explained in Plain English

Written by CA Sumit ChandwaniChartered Accountant & Founder · Reviewed by Minal Bihani, EA

By default, the IRS ignores your single-member LLC and taxes you directly.

If you're a US owner

The LLC's profit lands on Schedule C of your personal Form 1040. You pay income tax plus self-employment tax (15.3% on most of the profit, covering Social Security and Medicare). The LLC files no separate federal income tax return.

• Quarterly estimated taxes apply once you owe roughly $1,000+ for the year
• Business deductions — home office, software, equipment, health insurance — come off before tax
• State rules vary: some states tax or charge the LLC itself (California's $800 is the famous one)

The S-corp option

Once profit is comfortably clearing ~$40–50K, electing S-corp status can cut self-employment tax: you take a reasonable salary and the remaining profit avoids the 15.3%. It adds payroll and a separate return (1120-S), so the savings must beat the admin cost — run the numbers first.

If you're a foreign owner

The default flips from "nothing to file" to "two mandatory filings": a pro-forma Form 1120 with Form 5472 reporting transactions between you and the LLC (the $25,000-penalty form), and possibly Form 1040-NR if the LLC has US-source effectively connected income. No US tax owed doesn't mean no US filing owed.

The bottom line

US owner: Schedule C plus self-employment tax, with an S-corp election worth modeling as profits grow. Foreign owner: 5472/1120 every year, no exceptions. MOREOFTAX files both and tells you honestly when an election will and won't save you money.